SCHOOL OF COMMERCE

B.COM INDUSTRY INTEGRATED 5TH SEMESTER

COURSE : BUSINESS RESEARCH MANAGEMENT

A PROJECT REPORT
ON
IMPACT OF GST ON PHARMACY

Submitted by

Sinchana ds
Udayashree
Rahul
Selva

Under the guidance of

Anusha Y
Assistant professor
School of Commerce
Reva University
 ABSTRACT
IMPACT OF GST ON PHARMACY

GST also known as the goods and service tax is defined as the
giant tax structure designed to support and enhances the
economic growth of our country. GST is an indirect tax system
on consumption of goods & services at a national level which
mainly involves companies, industries and services. The GST
Rates for medicines were decided by the GST council. GST is
levied under 5 different rates, namely NIL, 5%, 12%, 18% and
28% based on the HSN code of the item. GST is expecting to
have a positive impact on the Indian Pharmaceutical Industries
as it will decrease the manufacturing price since eight different
taxes are levied in the pharmaceutical industries helps in easy
going business. Beside some positive impact, there are some
negative impacts also. A Drug Price Control is issued to make
sure that the costs of vital medicines are fixed in such a way that
they are affordable for everyone. According to the revised list
issued by the National Pharmaceutical Pricing
Authority( NPPA), prices of the majority drugs have come down,
which includes a list of antibiotics and drugs for treating cancer,
HIV, diabetes. GST also affects the Business Strategy of
Pharmaceutical Companies.
 TABLE OF CONTENTS
Page No

ABSTRACT…………………….…………………….02

LIST OF TABLES…………………………………….04

LIST OF FIGURES……………………………………05

UNITS

1. INTRODUCTION…………………………………..06

2. OBJECTIVES………………………………………07

3. REVIEW OF LITERATURE……………………….09

4. COLLECTION OF DATA………………………….10

5. DATA ANALYSIS…………………………………11

6. CONCLUSION……………………………………..21
 LIST OF TABLES

Tables Page

1.1 Analysis of how implementation of GST in pharmacy

Really benefits pharmaceutical companies…………….12

2.1 Analysis of how Amalgamation of all the taxes into on

u uniform Tax system will be helpful…………………….13

3.1 Analysis of impact of medical tourism by GST system…14

4.1 Analysis of any boom in medical tourism after GST

Impact……………………………………………….15

5.1 Analysis of GST impact on Pharma companies help

In rationalizing their chain supply……………………16

6.1 Analysis of how does GST impact reduces overall cost t

transaction with withdraw of CST…………………………..17

7.1 Analysis on how would GST implementation creates n u

ucertainity in the life saving drugs………………………18

8.1 Analysis on how do people think after the impact of GST on

p pharmacy that these companies getting expandable in
Profitability……………………………………………..19

9.1 Analysis on how does health care industry get profit by

implementation of GST…………………………………20
 LIST OF FIGURES

Figures Page No

1.2 Analysis of how implementation of GST in pharmacy

Really benefits pharmaceutical companies…………12

2.2 Analysis of how Amalgamation of all the taxes into one

u uniform Tax system will be helpful…………………13

3.2 Analysis of impact of medical tourism by GST system..14

4.2 Analysis of any boom in medical tourism after GST

Impact…………………………………………………15

5.2 Analysis of GST impact on Pharma companies help

In rationalizing their chain supply…………………….16

6.2 Analysis of how does GST impact reduces the overall cost
t transaction with withdraw of CST…………………….17

7.2 Analysis on how would GST implementation creates n

u ucertainity in the life saving drugs……………………18

8.2 Analysis on how do people think after the impact of GST

on pharmacy that these companies getting expandable in p
Profitability……………………………………………19

9.2 Analysis on how does health care industry get profit by

implementation of GST…………………………………20
 UNIT-1
INTRODUCTION
ON
IMPACT OF GST ON PHARMACY

Goods and Service Tax is the biggest Tax reform in the era of Indian
Indirect Taxation industry which will subsume various taxes like VAT,
CST, Service tax, excise duty, additional excise duty, Luxury Tax,
Entertainment Tax and many more.GST is the single taxation system in
India which will help in eliminating time, cost and effort. It is expected to
be beneficial for Indian drug makers in long run as its objective is to
simplify tax structure and bring operational efficiency.However, the
details such as the application of the rates to Pharma are not known and
we think that the government will stress on the fact that essential
medicines should have minimum taxes. However, GST is welcomed as it
creates a level playing field for pharmaceutical companies and will
eventually benefit the consumers. Considering the health care and Pharma
industry, it is expected that the new GST regulation would benefit the
consumers by making affordable health care. The whole industry is
waiting for the details of tax rates, exemptions and legislative framework
for implementation that is to be finalized by the GST Council.

Goods and Service Tax is expecting to have a positive impact on the

Indian Pharmaceutical Industries as it will decrease the manufacturing
cost, since eight different taxes are levied in the pharmaceutical industries
helps in easy going business. It will eliminate the cascading effect of
multiple taxes applied on One Product. The rate of GST should be kept at
a comparative level in the lowest slab for the pharmaceutical industries.
Analysts specify the GST rate up to 12% to be neutral tax rate whereas
anything above will have an inflationary effect on pricing.Overall Impact
of GST on the Pharmaceutical Industry is still uncertain as of now. It will
reduce complexities and hurdles. It needs to be Tax Free under GST
Regime to maintain the prices at Optimum Level.
 UNIT-2

OBJECTIVES
ON
IMPACT OF GST ON PHARMACY

 Refund in case of Inverted Tax Structure: the pharma industry has

represented that the inverted tax structure should be addressed in GST.
The industry is awaiting the finalization of GST rates. In this context,
the Model GST law provides for a refund of accumulated credit on
account of an inverted tax structure. This is a welcome provision.
However, it would be better if, in the first instance itself, the GST
regime does not provide for an inverted tax structure.

 Input tax credit : scope of the definition of capital goods has been
drafted on the same lines as in the existing CENVAT credit rules.
Accordingly, Input Tax Credit will be allowed only of those goods
falling within specified chapters of the model GST Law. Further, the
definitions of inputs and input services also provide for exclusions.
Therefore, it appears that even under GST, restrictions on Input Tax
Credit will continue. Further, a nexus of goods and services received
is also required to be established with outward supplies. Hence, the
industry needs to represent for a broad-based credit mechanism.

 Area based exemptions under the excise legislation and state

industrial policy: the first discussion paper on GST had stated that
area-based exemptions under the excise legislation and incentives
under the state industrial policies should be converted into tax refund
mechanism. However, the transition provisions prescribed under the
model GST law do not provide for the treatment of such exemptions/
incentives. Further, the valuation provisions envisage that subsidies
should be included in the transaction value. This would significantly
impact benefits available to the industry.

 Transition provision for imported goods: the transition provision

provides that the credit balances which were admissible under the
present regime would be carried forward under GST. In case of
imported finished goods, countervailing duty is not admissible under
the present regime, and in case of goods procured from contract
 manufactures also, excise duty credit is not available. Accordingly,
based on these provisions, under the GST regime, such stocks would
suffer double taxation.
 Taxability and valuation of Stock Transfers: The charging sectio
of the IGST Act provides for the levy of IGST on the supply of goods
made in the course of inter-state trade or commerce. Further, as per
the Model GST Law, the term ‘supply’ includes transactions between
a principal and an agent. Schedule 1 of the Model GST Law deems
any supply between two persons without consideration as a ‘supply’.
It is unclear whether stock transfers within the State would also be
subject to GST. It is to be noted that the GST framework was
intended to tax only inter-state stock transfers, and not intra -state
stock transfers.

 Taxability of Free Supplies: Supply of goods between persons

without consideration is deemed to be a ‘supply’. Accordingly, stock
transfer of promotion materials/ free samples will be subject to GST.
Subsequent supply of the said promotion materials to stockists/ end
customers will also attract GST. PwC 4 The valuation of such
samples/ materials will be as per the GST Valuation Rules, i.e. the
transaction value of goods of like kind and quality or the cost of sales.
Under the present regime, free supplies are not subject to VAT.
Hence, the promotion expenses of pharma companies will increase
under the GST regime.

 Discounts: Discounts/ incentives provided after the supply of goods

will be excluded from the transaction value, provided they are known
at or before the time of supply of goods, and are linked to invoices for
the supply of goods. Further, discounts at the time of supply are
excluded from the transaction value, only if they are in the course of
normal trade practice, and are disclosed on the invoices. Discounts
provided under secondary market schemes will therefore not be
eligible for exclusion from the turnover.
 UNIT-3

REVIEW OF LITERATURE
ON
IMACT OF GST ON PHARMACY

Currently , Indian drugs are exported to more than 200 countries in the
world. India is the largest provider of generic drugs medicines globally
and expected to expand further experiencing a boom in medical industry
which will help in generating additional returns for the industry.

The Indian Pharmaceutical Industry has been extremely growing in the

recent years, and the Ministry of Health targets the development of new
technologies by the end of this year to treat diseases, such as cancer and
tuberculosis. To attract more foreign direct investment (FDI), the
government raised the FDI cap for brownfield Pharmaceutical
investments to 74% in June and above 74% with the government
approval and FDI cap for Greenfield Pharmaceutical investments raised
to 100%.

The Model GST Law provides that if there is a reason to doubt the
accuracy of the transaction value declared by the supplier, then the
authorities can determine the transaction value as per the GST Valuation
Rules. Such an unfettered power to question the transaction value can
lead to litigation.

There is no clarity as to whether the present system of waybills and

check-posts would continue. The Model GST Law grants power to the
Government to prescribe documents for consignment of goods exceeding
INR 50,000 in value. In the light of these provisions, it is important that
the Pharma Industry lobby for the PwC 5 removal of waybills and
check-posts related compliance, with the objective of optimization of
delivery schedules, lowering operational costs, and consequently enabling
competitive pricing.
 UNIT-4

COLLECTION OF DATA

PRIMARY DATA

A primary data source is an original data source, that is, one in which the
data are collected firsthand by the researcher for a specific research
purpose or project. Primary data can be collected in a number of ways.
However, the most common techniques are self-administered surveys,
interviews, field observation, and experiments. Primary data collection is
quite expensive and time consuming compared to secondary data
collection. Notwithstanding, primary data collection may be the only
suitable method for some types of research.

Primary data is the data that has not been previously published. To collect
a primary data a questionnaire was prepared and primary data was
collected through questionnaire method. The questionnaire was
distributed to the local area pharmacist to obtain information. This helped
in interaction with the respondents.

DESIGN OF THE STUDY

The descriptive research was conducted by using the questionnaire

through mail and it is one of the from of methodology in data collection.

POPULATIONS

The population of the study contain on the pharmacists of local area of

Sanjaynagar

SAMPLE

The survey has been taken from the Pharmacist of local area of
sanjaynagar . the study does not include the entire population.
 UNIT- 5
DATA ANALYIS AND INTERPRETATION

Data analysis is the process of bringing order, structure and

meaning to the mass of collected data. ... Qualitative data
analysis is a search for general statements about relationships
among categories of data."

TABLE NO: 1.1

Analysis of how implementation of GST in pharmacy
Really benefits pharmaceutical companies.
ANSWERED : 19

SL NO RESPONSE NO. OF PERCENTAGE

RESPONSE

1 YES 15 78.95%

2 NO 4 21.05%

Figure 1.2
Table no : 2.1
Analysis of how Amalgamation of all the taxes into one
uniform Tax system will be helpful.

ANSWERED : 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 13 68.42%

2 NO 6 31.58%

Figure : 2.2
TABLE NO : 3.1

What could be the impact on medical tourism by GST system?

ANSWERED: 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 14 73.68%

2 NO 05 26.32

FIGURE 3.2
TABLE NO : 4.1
Analysis of any boom in medical tourism after GST Impact

ANSWERED : 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 12 63.16

2 NO 7 36.84

FIGURE 4.2
TABLE : 5.1
Analysis of GST impact on Pharma companies help in
rationalizing their chain supply.

ANSWERED : 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 14 73.68%

2 NO 05 26.32

FIGURE 5.2
TABLE NO : 6.1
Analysis of how does GST impact reduces the overall cost t
transaction with withdraw of CST.

ANSWERED: 19

SL NO RESPONSE NO. OF PERCENTAGE

RESPONSE

1 YES 15 78.95

2 NO 04 21.05

FIGURE 6.2
TABLE 7.1
Analysis on how would GST implementation creates n u
ucertainity in the life saving drugs.

ANSWERED: 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 11 57.89%

2 NO 08 42.11%

FIGURE 7.2
TABLE NO: 8.1
Analysis on how do people think after the impact of GST on
pharmacy that these companies getting expandable in
profitability

ANSWERED:19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 15 78.95

2 NO 4 21.05%

FIGURE 8.2
TABLE NO : 9.1
Analysis on how does health care industry get profit by
implementation of GST

ANSWERED: 19
SL NO RESPONSE NO. OF PERCENTAGE
RESPONSE

1 YES 14 73.68%

2 NO 05 26.32%

FIGURE 9.2
 UNIT-6
CONCLUSION
ON
IMPACT OF GST ON PHARMACY

The Pharma Industry should file representations to the Government on

the key issues arising out of the Model GST Law, as discussed above.

Some important action points, arising from the Model GST law, are as
under: Analyse the impact of GST on business operations such as
extent of costs savings in procurements, review procurement contracts,
analyse impact on free supplies, discount schemes, product pricing, and
the overall financial impact of GST. Review impact of Place of Supply
provisions on procurement and distribution, and ascertain the extent of
credit utilisation and blockage, if any. Review the procurement and
distribution model and evaluate options to move to an efficient supply
chain. Changes in the mechanism of utilisation of Input Tax Credit will
require effective vendor management. Businesses will need to ensure that
their vendors are compliant, by applying appropriate commercial
safeguards such as release of payment only after the vendor has uploaded
the invoice on the GSTN, or the possibility of vendor consolidations.
Review arrangements with group companies and the impact on valuation
for inter-group transactions. Review the impact of GST on business
processes and ERP systems, and prepare a high level transition plan.
These are the few important things to be followed and hence concluded.

THANK YOU